UC entitlement: ASU insurance, savings, child savings etc.

magritte

Hi all, I've always been in school or work and - apart from child benefit - I've never applied for any other type of benefits or tax credits. Some of my friends have recently lost their job due to covid-19 and pointed out to me that - if I lost my job next month - I would not be eligible for universal credit at all, and the only benefits I could get are 'new style JSA' for up to 6 months and child benefit. I am a single parent, no childcare costs, and already get the 25% council tax discount, being the only adult in the household. 
This apparently is because I have an insurance policy (ASU insurance cover for 12 months), I have "substantial" savings (my personal savings and my child's savings)  and I'm a homeowner (even though it's a mortgaged property). They pointed out to me that even my child's long term savings, which are earmarked for university, will be considered capital for the purposes of benefits entitlement calculation, because the money is not in a junior ISA... it's in premium bonds and regular savers, therefore "easily accessible" by me if I wanted to use it. So am I right to think that - if I lose my job and don't find a job in one year or so - that I will only be entitled to JSA for 6 months and child benefit and I could only access UC after 12 months (when my ASU cover runs out) and also only after I use up all/most of my savings, including my child's savings and any potential redundancy payments? Sorry if my questions are naive, I've never really had to think about this. Thanks. 

poppy12345

It seems like the insurance will affect any entitlement to Universal Credit £1 for £1. https://www.entitledto.co.uk/help/Non-work-income-overview-Universal-Credit

A child savings doesn't count for UC purposes, however, if you have access to it then they could say that it's counted but i think only a decision maker can decide on that. Savings of £6,000 and over will affect your UC by £4.35 per month for every £250 (or part there of) over that amount.

magritte

poppy12345 said:

It seems like the insurance will affect any entitlement to Universal Credit £1 for £1. https://www.entitledto.co.uk/help/Non-work-income-overview-Universal-Credit

Thanks, but meanwhile I've done some research and it looks like the income from a mortgage protection insurance policy might not count as "unearned income" for UC calculation purposes. I have mortgage protection insurance (ASU cover level) that I specifically took to protect my mortgage payments and utilities https://www.firstcallpaymentprotection.co.uk/mortgage/. Can anyone confirm that I am interpreting the text below correctly? 

https://www.mortgagesolutions.co.uk/news/2018/07/11/dwp-will-exclude-mortgage-protection-income-benefit-calculations/
For Universal Credit (UC), DWP said: “From 6 April 2018 any payments or any payments analogous to payments for mortgage protection should not be taken into account as unearned income in UC.”

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/899062/admh5.pdf
Note : Following the introduction of the loans for mortgage interest regulations1 on 6.4.18, Mortgage Payment Protection Insurance (MPPI) policies or any equivalent payments, are no longer taken into account in UC. DMs should ensure that when considering whether any income at H5086 should be taken into account that the policy does not contain an amount for mortgage protection (sometimes referred to as a ‘mixed income protection policy’). 

calcotti

magritte said:

poppy12345 said:

It seems like the insurance will affect any entitlement to Universal Credit £1 for £1. https://www.entitledto.co.uk/help/Non-work-income-overview-Universal-Credit

Thanks, but meanwhile I've done some research and it looks like the income from a mortgage protection insurance policy might not count as "unearned income" for UC calculation purposes. 

That’s correct. If it is a mortgage protection policy it is ignored. If it is a general loss of income policy it is counted. Whether your particular policy falls to be treated as mortgage protection will have to be determined by a Decision Maker. The link you have provided indicates that the policy will pay out more than the cost of your mortgage payments so possibly this is a mixed income policy in which case My reading is that a partial disregard may apply.

magritte

Thanks, I suspected that too. So that means my friends might have been right, even though they didn't know about MPPI insurance payments being ignored for UC calculation. My mortgage repayments are £900 pcm, but the mortgage protection insurance payment would pay me £1350 monthly for 12 months. I opted to pay a higher monthly insurance premium, to cover mortgage and house bills (utilities, phone, service charge, council tax etc). The difference of £450 will probably be considered "unearned income" by DWP and that will cancel or significantly reduce UC and other means-tested entitlement for the first 12 months of unemployment. And that would leave me with JSA and child benefit basically.

Dropping the MPPI policy doesn't make sense either, because my mortgage repayments are too high, and UC and JSA wouldn't cover our living costs anyway, even at maximum UC award level. So that also means that, if I were to lose my job tomorrow, I would need to ensure I got a new job within the next 12 months, to avoid losing my property when MPPI payments and my savings run out. 

calcotti

magritte said:

Thanks, I suspected that too. So that means my friends might have been right, even though they didn't know about MPPI insurance payments being ignored for UC calculation. My mortgage repayments are £900 pcm, but the mortgage protection insurance payment would pay me £1350 monthly for 12 months. I opted to pay a higher monthly insurance premium, to cover mortgage and house bills (utilities, phone, service charge, council tax etc). The difference of £450 will probably be considered "unearned income" by DWP and that will cancel or significantly reduce UC and other means-tested entitlement for the first 12 months of unemployment. And that would leave me with JSA and child benefit basically.

I think that's correct.
JSA is of course only payable for 6 months.
How many children do you have and how old are they?

magritte

One child, 12 years old. 

calcotti

magritte said:

One child, 12 years old. 

So your maximum UC entitlement would be personal allowance £409.89 plus child element £281.25 = £691.14. If there is £450 of unearned income the UC payable would be £241.14/month. JSA would pay £74.35/week (equivalent to £322.18/month).

magritte

Thanks, but I unless I am entering my info incorrectly in the entitledto calculator, don't think I would get any UC in the first 12 months because of the MPPI payments and the level of savings I have (even though it's <£16K). I haven't even considered any potential redundancy pay, as I've no idea how much that would be. I really am ignorant with re: to these things as I never had to look into it, but this covid-19 madness is forcing me to educate myself. 

xylophone

One child, 12 years old. 

Does he have a CTF?

calcotti

magritte said:

Thanks, but I unless I am entering my info incorrectly in the entitledto calculator, don't think I would get any UC in the first 12 months because of the MPPI payments and the level of savings I have (even though it's <£16K). I haven't even considered any potential redundancy pay, as I've no idea how much that would be. I really am ignorant with re: to these things as I never had to look into it, but this covid-19 madness is forcing me to educate myself. 

My calculation doesn't take into account the impact of any savings over £6,000 for which there would be a deduction of £4.35/month for every £250 or part thereof. I had overlooked your mention of them in your opening post. For capital of £15,000 the deduction would be (£15,000 - £6,000)/£250 x £4.35 = £156.60. UC payable would therefore be £241.14 (as per previous calculation) - £156.60 = £84.54.